Cooper University Hospital v. Heather Howard

COOPER UNIVERSITY HOSPITAL, APPELLANT,v.HEATHER HOWARD, COMMISSIONER OF THE NEW JERSEYDEPARTMENT OF HEALTH AND SENIOR SERVICES, RESPONDENT.VIRTUA WEST JERSEY HOSPITAL-MARLTON, INTERVENOR-RESPONDENT.

On appeal from the New Jersey Department of Health and Senior Services.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 2, 2011

Decided

Before Judges R. B. Coleman, Lihotz, and J. N. Harris.

Cooper University Hospital (Cooper) appeals from the December 2008 grant by the Commissioner of the Department of Health and Senior Services (the Commissioner and the Department, respectively) of a Certificate of Need (CN) to Virtua West Jersey Hospital-Marlton (Virtua) to provide elective percutaneous coronary interventions (PCI).*fn1 We affirm.

I.

There is an extensive administrative and appellate history that undergirds this matter, which we will not repeat at length.*fn2

Its genesis is found in the Department's November 2004 call for applications from qualifying hospitals for CNs to participate in a multi-state demonstration project*fn3 intended to assess the safety and efficacy of allowing community hospitals without on-site cardiac surgical services to provide elective PCI to their patients. Such elective PCIs were not permitted at such hospitals prior to the initiation of the demonstration project.

N.J.A.C. 8:33E-2.3(d)(3). At issue in this stage of the parties' dispute is the second CN granted to Virtua, which followed the remand in Cooper I and Cooper II.

Virtua is one of four hospitals operated by Virtua Health, a non-profit health care organization. It is located in Marlton and primarily serves a three-county area including Camden, Burlington, and Gloucester counties. In 2005, it was the only applicant for a CN that was located within the seven southernmost counties of the State.

Pursuant to its prior participation in the demonstration project commencing in 2006, and its separate license to perform emergency PCIs, forty-nine elective and forty-seven emergency PCI procedures were performed at Virtua in 2006. Seventy-eight elective, and thirty-five emergency PCI procedures were performed in 2007, while 125 elective and forty-five emergency procedures were done in 2008. In its post-remand application to the Department, Virtua had projected volumes of 171 elective and sixty-six emergency PCIs for 2008, and 178 elective and sixty-six emergency PCIs for 2009.

Because Virtua's projected PCI volumes were below the threshold required by the Department's rules, N.J.A.C. 8:33-3.11(e)(6)(v), it was required to submit a plan of correction. Virtua responded with a "detailed action plan" in which it explained that in 2007 and early 2008, it had only four interventional cardiologists on staff who could perform elective PCIs. In May 2008, however, Virtua added six additional cardiologists to participate in the demonstration project, resulting in a potential increase in patients that would allow it to meet the volume requirements imposed by the Department.

Department staff reviewed Virtua's CN application, noting that by virtue of its earlier participation in the demonstration project, Virtua remained the only provider of elective PCI procedures without on-site cardiac surgery backup in its service area. The application was then forwarded to the State Health Planning Board (the SHPB), for consideration at its July 10, 2008 meeting. Cooper filed objections to Virtua's CN application and its continued participation in the demonstration project. Nevertheless, the SHPB approved the application, along with several others, which left the final determination in the hands of the Commissioner.

The Commissioner issued a detailed, sixty-one-page final decision on November 10, 2008. She granted a CN to Virtua (and to eleven other similarly-situated facilities*fn4 ) to engage in the demonstration project. She described the purposes behind the project, the litigation preceding this appeal, the staff summaries and recommendations regarding the aggregate twenty-two CN applications, and the pertinent regulatory framework that applied to the applications before her.

The Commissioner also made a series of "General Findings" pertaining to the application and the approval process. First, she reiterated that the State's continuing participation in the demonstration project remained "valid and reasonable" and that it was "appropriate to approve [twelve] . . . CN applica[tions]," even though staff had recommended the approval of only nine. She did so in order to obtain the participation of more patients and to ensure that a sufficient number of patients remained if one or more of the demonstration project hospitals dropped out. The approval of twelve applications would also "improve access to minority and medically underserved populations, with a minimal impact on the existing providers." The impact on existing providers would be minimal because the demonstration project was of limited duration and the statistically-observed decrease in elective angioplasty in New Jersey demonstrated "signs of recovering from a brief one-year decline." Moreover, all of the approved applications demonstrated compliance with the rigorous review criteria, the demonstration project was approved by the Johns Hopkins University's Institutional Review Board, and each hospital's participation would have to be approved by that facility's Institutional Review Board.

The Commissioner then described the general regulatory criteria relevant to a hospital's participation in the demonstration project and noted that each approved applicant had met them. She specifically found that the approved applications would offer high-quality programs that adequately represented the State's diverse regions and hospital market areas, that the demonstration project would increase access to PCIs for underserved and minority populations, and that projected elective PCI volumes would meet required levels.

Further, the Commissioner reiterated that no hospital already providing cardiac surgery would be financially harmed by the Project; rather, such hospitals would more likely experience a decline in their PCI volumes because of the "declining use of cardiac surgery generally and the increasing safety of the angioplasty procedures that substitute for certain cardiac surgery procedures." Opposition from existing cardiac providers on that basis was "not well founded," because (1) a sharp decline in PCI procedures in 2007 appeared to be "leveling off" based on more recent data, and (2) not every patient would agree to participate in the demonstration project, and because "competition, particularly . . . based on studied clinical evidence and quality of care, can be a positive force to expanding access and enhancing services to patients." Finally, the Commissioner noted that in the 2007 calendar year, 1,201 patients enrolled in the demonstration project, and the "900 elective angioplasty cases performed at the nine demonstration project hospitals amounted to only 3.9 percent of the State's elective angioplasty cases" that year.

The Commissioner also made specific findings regarding each individual hospital's CN application. Virtua's application was found to meet all of the regulatory criteria, including the projected volumes of 100 procedures in year one and 200 in years two and three. Virtua had been licensed to provide emergency PCIs since 2004, was a participant in the demonstration project since 2006, and had "provided the sixth largest volume of diagnostic cardiac catheterization cases of the demonstration applicants during" the last three years. Furthermore, Virtua was the only applicant within "the seven southernmost counties" in the State, and there was only one other licensed elective PCI provider in Burlington County. The Commissioner found that approval of the application would have a minimal impact on existing providers such as Deborah Heart and Lung Center (Deborah) and Our Lady of Lourdes Medical Center (Lourdes), which was projected to experience, at most, a loss of 194 cases, or 8.3 percent of its PCI volume. In short, approval of Virtua's application "would not significantly impact access or volume in the Camden hospital market area."

Virtua was found in compliance with all licensing requirements for the cardiac services it provided, except that only thirty-five emergency angioplasties were performed there in 2007, one less than required. Moreover, access to medically underserved and minority populations would improve with the application's approval.

In her conclusion, the Commissioner conditionally approved Virtua's CN application. Specifically, its CN would be for no more than three years and would be subject to annual review.*fn5

Annual minimum facility and physician volumes had to be met "at the end of the first and second years." Elective PCIs could only be performed on those patients who consented to participate and were enrolled in the demonstration project, and could not be performed if Virtua dropped out or if the demonstration project was otherwise terminated. Cooper, aggrieved by the Commissioner's approval of Virtua's CN application, filed this appeal.

Consequently, our role in reviewing a final decision of an administrative agency is limited to four inquiries: (1) whether the agency's decision comports with Federal and State constitutional requirements; (2) whether the agency's action is supported by express or implied legislative policies; (3) whether the factual findings that provide a foundation for the agency's decision are based on substantial evidence; and (4) whether the legislative policies, when applied to the facts, show that the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors. In re Taylor, 158 N.J. 644, 656 (1999).

These principles are particularly apropos in the scientifically specialized field of health care. The Health Care Facilities Planning Act (HCFPA), N.J.S.A. 26:2H-1 to -26, requires the Commissioner to adopt and amend rules and regulations to effectuate its salutary purposes. N.J.S.A. 26:2H-5(b). Generally, the HCFPA provides for all new health care facilities constructed or expanded, and all new health care services, to be vetted through the CN process. N.J.S.A. 26:2H-7; see also In re Virtua-West Jersey Hosp., 194 N.J. 413, 416-17 (2008). Specifically, N.J.S.A. 26:2H-10 requires a hospital wishing to offer a new health care service to submit an application for a CN to the Department. The SHPB then reviews the application and makes a recommendation to the Commissioner. N.J.S.A. 26:2H-5.8(b). Ultimately, the Commissioner determines whether to grant or deny a CN. N.J.S.A. 26:2H-9.

Accordingly, resolution of this matter calls for deference to the Commissioner's highly concentrated and technical expertise. From our review of the record and the arguments of the parties, we are satisfied that the grant of the CN to Virtua was not infected with arbitrariness, caprice, or unreason. Moreover, in conformity with the admonition to explain and support administrative actions, we are satisfied that the Commissioner's decision to approve Virtua's CN application was adequately supported by substantial credible evidence in the record. See Riverside Gen. Hosp. v. N.J. Hosp. Rate Setting Comm'n, 98 N.J. 458, 468-69 (1985).

B.

On appeal, Cooper argues that Virtua's CN approval should be vacated for the following reasons:

POINT I: VIRTUA FAILED TO SATISFY THE BASIC REQUIREMENTS FOR A CN'S ISSUANCE UNDER N.J.S.A. 26:2H-8 AND N.J.A.C. 8:33-4.9(a), PARTICULARLY THAT ITS CN IS NECESSARY TO MEET UNMET NEED.

POINT II: THE COMMISSIONER'S REASONS FOR APPROVING VIRTUA'S CN AS STATED IN HER DECISION LETTER WERE ARBITRARY, CAPRICIOUS, UNREASONABLE AND SELF-CONTRADICTORY.

POINT III: THE COMMISSIONER FAILED TO CONDUCT THE REQUIRED INDEPENDENT, MEANINGFUL ANALYSIS TO DETERMINE WHETHER VIRTUA'S APPROVED CN WOULD CAUSE AN ADVERSE ECONOMIC OR FINANCIAL IMPACT ON COOPER'S DELIVERY OF HEALTH CARE SERVICES.

POINT IV: THERE WERE NUMEROUS FUNDAMENTAL FLAWS IN VIRTUA'S CN APPLICATION.

1. BECAUSE VIRTUA HAS FAILED TO ARRANGE FOR ITS STUDY PARTNER TO BE THE SAME INSTITUTION AS ITS EMERGENCY CARDIAC SURGERY BACK-UP, THE DATA THAT VIRTUA COLLECTS AND REPORTS FROM SUBJECTS WHO RECEIVE PCI AT VIRTUA IS IMPERMISSIBLY SKEWED TOWARD LOW RISK CASES.

2. VIRTUA'S CN APPLICATION DID NOT INCLUDE LOURDES' WRITTEN ASSURANCES THAT DATA AS TO SUBJECTS TRANSFERRED TO LOURDES ON AN EMERGENCY BASIS WILL BE REPORTED TO THE DOH AS REQUIRED BY THE DOH.

3. VIRTUA'S CN APPLICATION FAILED TO COMPLY WITH SEVERAL PROVISIONS OF THE NEW REGULATIONS.

POINT V. THE HARM TO THE PUBLIC CAUSED BY VIRTUA'S CN UNDERSCORES THE COMMISSIONER'S DEVIATION FROM THE HCFPA AND THE UNREASONABLENESS OF APPROVING VIRTUA'S CN. POINT VI: THE HARM TO COOPER FURTHER DEMONSTRATES THE DOH DEVIATED FROM THE HCFPA AND UNREASONABLY APPROVED VIRTUA'S CN APPLICATION.

1. THE SHARP DECLINE IN COOPER'S ELECTIVE PCI VOLUME IN 2007 AND 2008, WHICH IS COMPOUNDED BY THE STATEWIDE DECREASE IN THE NEED FOR ELECTIVE PCI.

Notwithstanding the creativity and imagination of many of these arguments, we remain unpersuaded that the Commissioner's actions detrimentally affected Cooper or otherwise jeopardized the public interest.

Cooper claims that the decision to grant Virtua's CN to participate in the demonstration project was arbitrary and capricious because there was no unmet need, as required by N.J.S.A. 26:2H-8 and N.J.A.C. 8:33-4.9(a) (a CN application should not be approved unless the proposed service "is necessary to provide required health care in the area to be served"). Specifically, it is asserted that there are no data supporting the Commissioner's finding that there was an unmet need for additional PCI providers in Virtua's service area, since there were already four cardiac surgical centers nearby with excess capacity.

Cooper's focus upon unmet need misses the relevant target. The unmet need, as recognized by the Commissioner, was the theretofore unharvested data from which it could be determined if elective PCI could be safely and electively performed at community hospitals without on-site cardiac surgical backup. The Commissioner made it clear in her decision that the collection of objective data in this respect was the primary goal of the demonstration project. The Commissioner further opined that if current trends continued such that the number of cardiac surgical procedures declined while the number of PCIs increased, then the safe and efficient provision of the latter procedure at community hospitals without the need for costly on-site cardiac surgical facilities could result in a more effective use of resources, creating substantial savings to the health care system.

Notably, we have already approved the Department's adopted rules and regulations concerning the demonstration project. Cooper III, supra, slip op. at 18. Those rules authorized the demonstration project, by which the efficacy and safety of elective PCI in hospitals without on-site surgical backup could be determined. Thus, the Commissioner's rationale for adopting the rules was imparted to the specific approval of Virtua's CN application.

Cooper's assertion of the lack of an unmet need is further undercut, as the Commissioner noted, by Virtua being the only hospital in a seven-county area that sought to participate in the demonstration project. This is largely because surrounding cardiac providers, by definition, could not participate given their on-site surgical facilities. Therefore, in light of the data collection needs that the demonstration project furthered, and because Virtua was the only hospital in the southern part of the State seeking to participate, the Commissioner properly and sufficiently identified a health-related unmet need that the CN application served.

Cooper also contends that because the demonstration project violated certain national health care guidelines, approval of the CN application would not contribute to the orderly development of effective health care services in the State. We find that by virtue of our prior validation of the underlying regulatory framework permitting the demonstration project to exist, this argument is unfounded. This appeal is not the proper occasion to revisit the wisdom of the Department's reasonable decision to participate in the demonstration project.

Cooper further urges that the Commissioner's approval of Virtua's CN application was "arbitrary, capricious, unreasonable, and self-contradictory" because: (1) there was no evidence to support the Commissioner's conclusion that minority and medically underserved populations would have increased access to elective PCIs if Virtua's CN application were approved, or that access to that procedure in the southern-most counties would improve; (2) Virtua failed to meet procedure volume requirements in 2006, 2007, or 2008; and (3) approval of the CN application would result in a "siphoning of elective PCI patients from Cooper to Virtua." We disagree.*fn6

The Commissioner adequately relied upon sufficient evidence in the record in concluding that the approval of the CN application would improve access to elective PCIs for minority and medically underserved patients in the State's southern-most counties. Available evidence demonstrated that the minority population in 2000 was 23.3% in Burlington County, 31.4% in Camden County and 14.9% in Gloucester County. Virtua's "service area population is comprised of 11.54% non-white and the forty-five-and-over population is comprised of 10.45% non-white" and its "minority use rate of diagnostic cardiac catheterization was above the [percentage] of non-white residents in the service area population in 2005 and 2006." Finally, during its prior participation in the demonstration project, Virtua had the sixth largest volume of diagnostic PCI procedures among all of the demonstration project's participants. In short, there was sufficient evidence to support the Commissioner's conclusion that approval of the CN application would likely increase access to elective PCIs for the minority and medically underserved population in its service area.

Furthermore, the fact that Virtua's procedure volumes were slightly below minimum requirements does not require the reversal of the Commissioner's decision to approve the CN. Rather, the de minimis deficiency in this respect was identified and brought to Virtua's attention by the Department, which commanded a plan of correction. Virtua responded by informing the Department that it had hired six additional cardiologists to its existing four-cardiologist team, thereby anticipating a reasonable increase in the volume of procedures to appropriate levels.

Finally, a specific condition of Virtua's CN approval was that the Department would evaluate its compliance with the procedure volume requirement "at any time period at the Department's discretion," and at the end of the first and second years of the project. Virtua was "required to fully meet the facility PCI volume requirement . . . for the first and each subsequent year." This oversight is not the hallmark of arbitrary administrative action. We find it suitable and within the exercise of principled administrative discretion.

Cooper claims, under its various point headings, that the Commissioner failed to analyze the significant impact that the approval of Virtua's CN application would have upon its existing on-site cardiac surgical program. N.J.S.A. 26:2H-8 provides in relevant part that no CN can be issued if the approved service would "have an adverse economic or financial impact on the delivery of health care service in the region or Statewide."

In her general findings, the Commissioner noted that in 2007, the demonstration project accounted for only 3.9% of the statewide elective PCIs performed that year. She found that opponents of the State's participation in the Project therefore "greatly overstated the potential for the demonstration project hospitals to reduce elective angioplasty volumes at existing service providers in a way that meets the statutory criterion of having an adverse financial or economic impact on the delivery of health services in a region or Statewide." This was particularly true since the demonstration project was expected, at that time, to last for only three years.

In addressing Virtua's relationship with its surrounding competitors, the Commissioner noted that 2.2% of Deborah's PCI cases came from the service area, and concluded that the chance those patients would choose to enroll in the demonstration project was "questionable." Thus, the Commissioner was persuaded that the award of a CN to Virtua would "have no greater impact on Deborah than the many other factors related to a competitive and changing healthcare market." Further, another 10.6% of Deborah's PCI volume came from the service area of another demonstration project participant, Community Medical Center, not from Virtua.

As for Lourdes, the Commissioner found that if 75% of the referrals to Lourdes that generally came from Virtua were lost because of the demonstration project, Lourdes would lose at most 194 cases, or 8.3% of its volume. Thus, similar to the result vis-a-vis Deborah, it was found that Virtua's CN would "have no greater impact on Lourdes than the many other factors related to a competitive and changing healthcare market."

The Commissioner further noted that none of Virtua's participating cardiologists performed angioplasties at Cooper, and that three of Virtua's participating cardiologists, who performed 93.6% of the PCIs there, "continued to perform the vast majority of their cases at Lourdes." In short, the Commissioner determined that the participation of Virtua in the demonstration project "would not significantly impact access or volume in the Camden hospital market area," which included Cooper.

Given the foregoing, Cooper's reliance upon In re Virtua-West Jersey Hospital, 194 N.J. 413 (2008) is misplaced. In that case, the Commissioner failed to analyze, in any meaningful way, whether the grant [of the CN] will have an adverse impact on the region's urban hospitals. That omission is a critical failing in a proceeding that has, as one of its pillars, avoidance of negative impacts on the delivery of health care services in the region. [Id. at 436.]

Thus, the Commissioner's decision to grant a CN was reversed and remanded so that a full analysis and explanation could be conducted relating to the impact that granting the application would have on existing providers. Ibid.

In the instant matter, the Commissioner explained in great detail the reasons why a CN for Virtua would not severely impact any of the nearby cardiac surgery providers. Thus, the facts and circumstances here are substantially unlike those in the case upon which Cooper relies. Moreover, the demonstration project's finite duration mitigates against the speculative negative competitive effect claimed by Cooper.

Cooper's separate claim that approval of Virtua's CN application will significantly impact its "ability to provide quality [angioplasty] services in uncompensated care," because its volume of angioplasty cases will decline so precipitously that safety and access for minorities will be compromised is mostly hyperbole. The Commissioner found that approval of Virtua's CN application would have little impact on Cooper's cardiac surgery volumes because none of Virtua's cardiologists performed elective angioplasty at Cooper. Thus, any decrease in Cooper's claimed PCI volumes since Virtua began to participate in the demonstration project are logically unconnected to Virtua; rather, it was likely the result of the across-the-board decrease in PCIs in 2007, which trend had just recently reversed itself.

Cooper next contends that Virtua's CN application suffered from "fundamental flaws," which renders the Commissioner's approval arbitrary and capricious. First, Cooper asserts that the CN application was defective because Virtua's "study partner" under the demonstration project was not the same institution as that serving as its emergency surgical backup facility. Specifically, Cooper claims that because Lourdes had not agreed to participate with Virtua in the demonstration project, "any elective PCI patients who Virtua emergently transfers to Lourdes cease to be patients of [the demonstration project], and the data as to such patients will not be collected as part of [the demonstration project]." This disconnect is claimed to violate N.J.A.C. 8:33-3.11(e)(4), which provides that in order to participate in the demonstration project, a hospital must in part have signed one or more agreements with one or more New Jersey-licensed cardiac surgical centers indicating that the New Jersey-licensed cardiac surgery center is willing to participate in the [demonstration project], including collecting and submitting data to the principal investigator, as the center with on-site surgery to which some of the applicant hospital's patients will be randomly assigned for elective PCI. [Id.]

Also implicated is N.J.A.C. 8:33-3.11(e)(6)(i)(4), which requires demonstration project applicants to document "an agreement to collect and study data in a timely fashion."

Here, as part of its CN application, Virtua submitted correspondence from the Atlanticare Regional Medical Center (ARMC) indicating that facility's "commitment . . . to participate with Virtua as the on-site surgery center in the [demonstration project]." ARMC agreed to comply with the Manual, including the collection and submission of data, and to accept randomly assigned demonstration project patients. Thus, Virtua met its regulatory obligations for the demonstration project.

The absence of a Lourdes commitment to participate in the demonstration does not undermine the regulations or the statistical efficacy of the demonstration project. Rather, N.J.A.C. 8:33E-2.7(a) requires Lourdes, as a cardiac surgery center, to enter into agreements with hospitals in its service or the contiguous counties (such as Virtua) to accept cardiac patients on an emergent basis. Thus, Lourdes is required to, and has agreed to accept, any demonstration project patients requiring emergent treatment transferred from Virtua. We are unpersuaded that this arrangement violates either the letter or spirit of the instant CN process.

Cooper further claims that Virtua's CN application was imperfect because it did not contain Lourdes's written agreement to supply data respecting demonstration project patients emergently transferred to it from Virtua. As noted by the Commissioner's predecessor in 2005, as part of the much earlier phase of this administrative process, [a]s long as Virtua obtains consent from enrolled patients to collect medical records from any other hospital at which the patient receives either elective angioplasty or emergency cardiac surgery, the data can be collected from the treating hospital, and the treating hospital must provide it, without infringing on issues with respect to legality or confidentiality issues.

Thus, the asserted imperfection does not exist, and Cooper's claim of deficiency is rejected.

Cooper contends that Virtua cannot meet the requirement of N.J.A.C. 8:33E-2.16(b) that written protocols exist to ensure that a patient can be transferred from a demonstration project facility to a collaborating cardiac surgery center's operating room within one hour from the time the transfer is deemed necessary. However, Lourdes agreed to take emergency patients from Virtua, and the two facilities are within twenty miles of each other. Thus, the CN application was properly not rejected on that basis.

Cooper posits that the Commissioner's decision to grant a CN to Virtua should be reversed because that action could potentially harm the public, thereby violating the HCFPA's requirement that any CN the Commissioner grants must contribute to the provision of effective health care services. N.J.S.A. 26:2H-8. Specifically, Cooper relies upon a research paper that indicated a high mortality rate for elective PCIs done at hospitals without on-site surgical backup. From this, Cooper extrapolates that because of its service to the same area as Virtua, coupled with the alleged lack of unmet need, the award of the CN would unnecessarily pose a safety risk to patients in that service area.

In Cooper III we addressed both the applicable research and ancillary papers that Cooper claims cast doubt upon the safe provision of elective PCI at hospitals without on-site surgical backup. In that case, Cooper argued that the Department's adoption of N.J.A.C. 8:33-3.11(e), in light of relevant medical evidence, constituted arbitrary and capricious action. Cooper III, supra, slip op. at 1-2. We rejected reliance on those studies, instead affirming the Department's decision to adopt the rules in question and participate in the demonstration project. Id. at 13-14. In like vein, we find nothing in the specific grant of Virtua's CN to undermine those regulations or to call into question any aspect of the approval of Virtua's CN application.

To the extent that we have not addressed with specificity any of Cooper's other appellate arguments, we find that they are not sufficiently meritorious to warrant discussion in a written opinion, and are otherwise lacking in strength to overcome the presumptive validity of the Commissioner's decision, which is supported by adequate credible evidence in the record as a whole.

R. 2:11-3(e)(1)(D), (E).

Affirmed.

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